The last tycoons: the secret history of Lazard Frères & Co (104 page)

Within hours of sending the fax, Bruce appeared beside Michel in Paris to announce that Bruce, then fifty-three, had been named "head of Lazard," effective January 1, 2002, succeeding Michel, then sixty-nine, "in his executive capacities." Michel remained chairman of Lazard LLC and chairman of the Lazard board of directors. This announcement made it sound like Michel was finally giving up managerial control of the firm. "After 25 years of stewardship as head of Lazard, I am very glad to have a successor who will continue to lead Lazard as the preeminent independent bank," Michel said. "I've known Bruce for a very long time, and know that he is a fiercely independent and original adviser. These are qualities exemplified by Lazard bankers throughout the world, and what our clients have come to expect from our firm. Bruce has both my endorsement and the full support of our entire leadership team."

Bruce was equally effusive. "I am delighted to join Lazard," he said. "We've been discussing this possibility from time to time over 15 years. When I began my own firm, I aspired for it to become like Lazard. Lazard has an unmatched franchise with extraordinarily talented partners. I look forward to working with all my new colleagues." He added: "Since last August, a lot of [firms] have approached me. But the big event was that Michel decided he wanted someone to replace him as head." Reflecting on this moment some four years later, Bruce said his goal in taking over Lazard was a simple one: "To take a firm with potential to be a great firm and harness that potential and adapt it to any circumstances." He observed from afar that Lazard was a "great firm" with an "intergenerational transition" issue. "Classic small business problem," he summarized, unsympathetically.

In truth, Bruce had won more power from Michel than anyone else ever had, prima facie evidence of just how desperate Michel was for a well-known outsider with the ability to restore Lazard's luster. Confirmed one senior partner, "It was obviously a deal of desperation."

Wasserstein, "Bid-'Em-Up Bruce" to his enemies ("I could live without the name," he has said), the consummate deal tactician and the author of an 820-page tome (called
Big Deal: The Battle for Control of America's Leading Corporations),
had snookered his Lazard foe. "One of the most interesting things about this business is that you see people at their ultimate point of crisis," Bruce wrote in his 1998 book about the M&A world. When he got to Lazard, he gave every partner a copy of his book, which he had dedicated to his third wife, Claude, "my love and inspiration." (With that, he had now dedicated a book to each of this three wives.)

Bruce's big deal with Michel allowed him, for a contractual period of five years, ending in January 2007, to run the firm day to day without Michel's interference. He had absolute power to hire, fire, and set compensation. In investment banking, there are no more important motivational tools. In the end, Bruce bought from Michel, for about $30 million, a 1 percent stake in the firm, and Michel granted him another 7 percent stake, for free, by diluting the working partners--not the capitalists--bringing his total ownership to 8 percent, just below Michel's direct stake of 9 percent, and making Bruce the second-largest private shareholder in Lazard. (Michel owned other, indirect stakes as well.) The media misreported--or more likely were deceived about--the amount of Bruce's Lazard investment, claiming he had invested between $100 million and $200 million for his stake. This was a complete fiction that even Michel wondered about when he read it repeatedly in the press. "Well, I had two thoughts, not reactions, two thoughts," he said. "The first thought was that probably I did not negotiate with him enough, because it seems that it would be so normal that a guy like that
should
put in $100 million or $150 million, and remember that's huge, so maybe I should have forced him to put in $100 million or $150 million. That was my first reaction. And my second reaction or thought was I wonder if he is behind the story to make himself look more important."

Bruce also got Lazard to lease for him a Gulfstream jet, which he uses not only to fly to Lazard's twenty-nine offices worldwide but also for short jaunts to Boston or Washington. He remained chairman of Wasserstein & Co., his buyout and venture capital fund. Michel did appear to outnegotiate Bruce, though, with regard to certain governance provisions relating to the authority to take the firm public or to merge it. These rights Michel retained unilaterally. He also retained the right to renew, or not, Bruce's contract in 2007. Michel also held control of six of the eleven seats on the Lazard board of directors.

AT LAZARD IN
Paris, which has remained more insular than New York or London, several of Michel's longtime partners told him the deal he had negotiated with Bruce was nothing short of
suicidal.
Michel listened to the other opinions but kept his own counsel. "I knew the accounts of the Wasserstein firm had never been very good," he said, "but I also knew the dream of his life was Lazard. Consequently, I believed that at Lazard he would care more because after all it was the dream of his life. It's not a job, I believe. It's a calling." He had tried Steve, the brash, young, energetic superstar who rightly prized independence from Michel above all; he had tried the courtier Loomis, the moralistic loyalist who seemed paralyzed with indecision from the start; and as Michel likes to say, he had sort of tried Edouard, his mercurial, erratic, temperamental--"cyclical" was Michel's word--son-in-law, who at least thought and acted like an owner. At Lazard, there is only one common denominator for all three of these men: Michel. The closest he comes to admitting his own role in their failure is to say, "It is very difficult to manage a private firm without being the owner."

How well Michel and Bruce would get along remained to be seen, of course. "Both are considered brilliant bankers who built businesses against the odds," the
Wall Street Journal
wrote. "But both are domineering personalities used to getting their own way, which could create conflict." From the start, the two men staked out their respective positions. In a joint telephone interview with the
Journal,
Bruce said he had "the same job that Michel had" and the "same executive functions." Michel jumped in and said that he was chairman of the board and retained "veto power." Bruce responded the board had veto power "only if I want to sell the company in an extraordinary transaction." Michel conceded he was finally ready to have Lazard managed by Bruce but added, "I won't become uninterested in Lazard, and I hope I can find a modest way of being some help in the coming months."

But in interviews Bruce gave to the American and British press after his appointment as head of Lazard, he left no doubt he was in charge and that the days of indecision, infighting, and drift were over. "People should worry about customers, not politics," he told the
Financial Times.
"Those days are ending at Lazard. Some people will come; some people will go, but the focus on politics--who's going to get what job--that's all over.... Clients, clients, clients are the top three priorities. The fourth priority is an end to politics." He said his vision for Lazard was one of husbanding intellectual capital. "My objective is to have it [be] not the biggest [firm] but certainly to aspire for the highest quality advice," he said. "The world is increasingly needing quality advice." As to whether the firm should one day be sold, he said he had not given it much thought. "I'm focused on developing the firm naturally," he said. "I'm not thinking about anything [else]." When asked by
BusinessWeek
if he would be sharing power with Michel, Bruce responded definitively but not entirely accurately, "There is no sharing. I have complete authority except that he's chairman of a board that has the right to veto a merger. Having said that, I look forward to his advice. I'm not threatened by it. And he wants to be helpful. [He knew] the only job I would be interested in is his job. He has known that for a while. It was just a decision on his part.... It was up to him, and that's why the offer was attractive."

The reaction within Lazard to Bruce's appointment was generally quite favorable, at least at the outset. There seemed to be a universal view that the Loomis era had been a total failure and the return of Michel had brought nothing but chaos. Anything different would have to be better--perhaps Bruce could stop the bleeding and attract new partners. Some partners hailed Wasserstein's arrival as the final chance to resurrect a moribund franchise. Wasserstein "inherited a ship with a mutinous crew," one observer said. Indeed Lazard partners had variously described the previous decade at the firm as an endless series of stabbings punctuated by the clear view that it would be unwise to send the Lazard partners "off on the same duck shoot...since they would probably have ended up shooting each other." Nicholas Jones, then vice chairman of the London office, said, "The benefit of someone who has come in from outside is that he has come in on his own terms." Paul Haigney, the partner in charge of the firm's small West Coast operations and a former partner of Bruce's at Wasserstein Perella, greatly appreciated that Bruce was an investment banker first and a CEO second. "It makes a huge difference to have a creative, practicing investment banker at the helm," he told the
Wall Street Journal.
"Let's face it. Bruce's name opens a lot of doors."

Other Lazard working partners were far less sanguine about Bruce's arrival. One partner compared Michel's capitulation to Bruce to that of the surrender of the emperor Hirohito at the end of World War II. Others were even more skeptical. "This is going to be a clash of egos on top of a clash of cultures," said one partner. Added another: "Bruce is great at doing deals for Bruce. But he's not the guy to save Lazard." But another partner understood perfectly what transpired between Michel and Bruce. "Clearly Michel knew what he had to do," he said. "Obviously Bruce had sold his firm. He'd always obviously cherished the Lazard name and worshipped the concept of being part of the firm and its culture. You know, as a teenager dreams about the chick in the centerfold of
Playboy
, I think this was his aspiration. I think the truth is that Michel probably did the only thing that he could do.... Half the firm wasn't even coming to work, because guys were freaked out. And Bruce jumped on it."

CHAPTER
19

BID-'EM-UP BRUCE

B
ruce Wasserstein is the Harvey Weinstein of investment banking. Like Weinstein, the ample Wasserstein is arrogant, brash, boorish, and much feared. He's a creative and entrepreneurial genius, fabulously wealthy, notoriously strong-willed and short-tempered. He is also said to resemble, in both appearance and demeanor, the older Andre Meyer. He is an eccentric much loved by his small, rich coterie of bankers--who have followed him assiduously as he cut a wide swath across Wall Street in the 1980s and 1990s--and by few others, with the notable exception of the members of his gifted and quite devoted family. "Bruce is very creative," his sister Wendy, the Pulitzer Prize-winning playwright, once said. "He would tell you that what he and I do is not actually so different. Of course, I would tell you that he made up the three-tiered deal, but I couldn't tell you what it is."

Until Bruce went to high school, the Wassersteins lived in the predominantly Jewish section of Midwood, Brooklyn, right in the heart of the borough, south of Prospect Park. They lived in an eighteen-room, redbrick, stand-alone corner Dutch Colonial house on Avenue N. This was a family of serious achievers. Bruce was born on Christmas Day 1947 in Brooklyn, and a published report claimed he was the first Jewish baby born that Christmas. "His PR machine was working from the beginning," his first wife explained. Bruce was one of five siblings--with an older brother, Abner, and three sisters: Wendy, the youngest; Georgette, a Vermont innkeeper; and Sandra Meyer, referred to correctly by Wendy as a "female pioneer in corporate America." (A third son died a week after birth.)

Morris and Lola Wasserstein, Bruce's parents, were once described as a "little like Penn and Teller: One talks, the other doesn't." Someone who knew them said: "Morris was an extremely gentle, quiet, retiring person. By the time I met him, you just rarely heard him speak. He was very, very quiet. Lola was just a total pisser." They had a wonderful and long love affair. The quiet one, Morris Wasserstein, came to New York, through Ellis Island, in 1927 from Poland, according to the handwritten 1930 U.S. census records. Three of the Wasserstein brothers--Jerry, Teddy, and Morris--together started Wasserstein Brothers Ribbons on West Eighteenth Street. The company's clever slogan was "Ribbons Fit to Be Tied." Morris, a gifted businessman, also invested in real estate--he owned the building on Eighteenth Street where the ribbon business was, as well as buildings in what is now SoHo--and in the stock market. "They were in the ribbon business so they could be in the real estate business," explained Ivan Cohen, a cousin of Bruce's.

Around the mid-1940s, Morris's oldest brother George died. He had been married to a Lola Schleifer. They had two children, Abner, the oldest, and Sandra, who was born in 1937. After George died, in a variation of the once common Eastern European Jewish tradition, Morris married his widow. "We should all be as happy as they were together," remembered one family member, with approval. Morris then became the "father" to Sandra and Abner. Morris and Lola were the biological parents of Georgette, born on New Year's Day 1944 (named after her deceased uncle), Bruce, and Wendy, born in 1950. Bruce was not aware that Abner and Sandra were the son and daughter of his uncle George until he was in his twenties.